Bond Problem-ACCT2 X Lease Prob (Studentus xK Bond Prob Test (Stude x x- C Offic

Question

Bond Problem-ACCT2 X Lease Prob (Studentus xK Bond Prob Test (Stude x x- C Office Editing for Docs, Sheets & Slides news app htm Bond Prob Test (Student).xls File Edt Insert Format Help f Period GH 1 Period Beg. Bal. nterestPaymentBal. Change End Balance Bond Amortization 5 year bond tace value 1,000.00 tace interest 0.18 effective ra 044 11 10 12 Credi PV of Bond Dob 14 Sale ot 15 Bond PV of interest Payments Sale Price B 1st teterest Paymveni 2nd Interest 3 Payment 25 r end ot penod 7 30 Payoff of Bond Detr TOSHIBA esc 12 34 56

Explanation / Answer

PV of bond debt = $1000 * PVIF@7%(14%/2) 10 periods = $1000 * 0.5083 = $508.3 PV of interest payments = $1000 * 18% * 6/12 * PVIFA @7%, 10 periods = 90*7.0236 = $632.1 Sales price of bonds = $508.3+$632.1 = $1140.5 Period Beg. Bal Interest (7%) Payment Bal. change End. Bal 1                                                                             1,140.50                   79.84                     90.00           -10.17 1,130.34 2                                                                             1,130.34                   79.12                     90.00           -10.88 1,119.46 3                                                                             1,119.46                   78.36                     90.00           -11.64 1,107.82 4                                                                             1,107.82                   77.55                     90.00           -12.45 1,095.37 5                                                                             1,095.37                   76.68                     90.00           -13.32 1,082.04 6                                                                             1,082.04                   75.74                     90.00           -14.26 1,067.79 7                                                                             1,067.79                   74.75                     90.00           -15.25 1,052.53 8                                                                             1,052.53                   73.68                     90.00           -16.32 1,036.21 9                                                                             1,036.21                   72.53                     90.00           -17.47 1,018.74 10                                                                             1,018.74                   71.26                     90.00           -18.74 1,000.00 Account Head & Description Debit Amount Credit Amount Sale of bond Cash 1140.5 Premium on sale of bond 140.5 18% bond 1000 1st Interest payment Interest expenses 79.84 Premium on sale of bond 10.16 Cash 90 2nd Interest payment Interest expenses 79.12 Premium on sale of bond 10.88 Cash 90 Pay-off bond debt after end of period 7 for $1050 18% bond 1000 Premium on sale of bond (16.32+17.47+18.74) 52.53 Cash 1050 Gain on redumption of bond 2.53 Pay-off bond debt when bond matures 18% bond 1000 Cash 1000

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